Archive forFebruary, 2015

The Office for National Statistics revealed business investment in the UK fell 1.4% in Q4 2014, the largest decline since Q2 2009, vis-à-vis a 1.2% drop in Q3 2014. The decrease was largely ascribed to lower profitability in oil production and uncertainty ahead of the general elections in May.

The British Bankers’ Association reported mortgage approvals for house purchase in the UK rose to 36,394 in January from 35,816 in December. The agency also revealed the personal loans and overdraft grew 3.9% y-o-y.

The Bank of England (BoE)’s Governor Mark Carney stated low inflation in the UK is temporary and expects inflation to reach the 2% target in the next two years. The governor said that the decline in inflation was primarily due to lower oil and food prices. Inflation stood at 0.3% in January 2015.

According to the Confederation of British Industry, the retail sales balance in the UK fell to +1 in February, its lowest level since November 2013, from +39 in January. The decline was ascribed to lower sales in supermarkets and department stores. Moreover, sales expectations in March dropped to +27 from +42 in February.

China Securities Regulatory Commission, the market regulator, has given the green signal for short selling on the Shanghai-Hong Kong stock connect. Effective 2nd March, the decision entails strict limitations on the activity, through short-selling ratio caps, to be announced at a later date.

According to the Society of Motor Manufacturers and Traders, the UK’s car manufacturing output fell 1.2% y-o-y to 127,385 vehicles in January due to higher investment in technology and production of new models. UK car exports declined 6.2% y-o-y to 97,022 vehicles during the month.

According to data released by the Office for National Statistics, total pay in the three months to December increased 2.1% compared with 1.8% between September and November due to higher bonus payments. Total pay rose 2.4% y-o-y in December, its largest lead over inflation since March 2010. UK annual inflation rate eased to 0.3% in January 2015 from 0.5% in December 2014.

According to data released by the Office for National Statistics (ONS), the UK’s consumer price index (CPI) fell to 0.3% y-o-y in January, the lowest since 1988, compared with 0.5% y-o-y in December. Moreover, the retail price index declined to 1.1% from 1.6% in December due to falling motor fuel and food prices. However, core inflation gained 1.4% y-o-y in January after a 1.3% y-o-y increase in the previous month.

The meeting in Brussels over Greek debt was inconclusive as Greece refused to accept the extension to the €240bn bailout programme due to expire on 28th February. The country’s newly elected leftist government is seeking to revamp the bailout terms that involve extreme austerity measures. The proposal for the new programme includes providing a bridge loan to repay €7bn of maturing bonds and refinance the remaining through growth-linked bonds. In the absence of any deal, Greece is likely to soon run out of cash.

The European Central Bank (ECB) provided additional emergency funds worth €5bn to Greek banks by raising the cap of Emergency Liquidity Assistance to €65bn. Ewald Nowotny, a member of the ECB’s Governing Council, suggested that these funds may be replaced by cheaper direct ECB finance if Greece signed a reform programme.

The meeting between Greece’s Finance Minister Yanis Varoufakis and its international creditors failed to reach an agreement on the former’s bailout plan. The deadlock may result in a default by Greece and an exit from the euro currency. Greece is believed to have proposed a replacement of 30% of its bailout obligations with a 10-point plan of reforms during the meeting.

John Longworth, Director General of the British Chambers of Commerce (BCC), stated that the UK should hold a referendum to decide its European Union membership status soon. The move would mitigate the damaging impact of business uncertainty, he said.

Halifax revealed that UK house prices rose 2.0% m-o-m in January compared with a 1.1% increase in December. The unexpected rise may be due to lower mortgage rates, stamp-duty reforms and a real increase in income.

According to Markit, UK’s services Purchasing Managers’ Index (PMI) climbed to 57.2 in January compared with 55.8 in December. Moreover, the services PMI’s employment index increased over 2 points to 57.1, driven by faster hiring and rising new orders.

According to the British Retail Consortium (BRC), UK shop prices declined 1.3% y-o-y in January compared with a 1.7% fall in December. Food prices decreased 0.5% after a 0.1% drop in the previous month. The survey reflects price changes in over 500 products.

Chancellor George Osborne confirmed that the Bank of England would be given additional powers to limit mortgage lending and excess leverage to safeguard the stability of the UK’s financial system. In addition, he warned against the disagreement between Greece and the Eurozone over the former’s debt.

Yanis Varoufakis, Greece’s Finance Minister, insisted on renegotiating the terms of the €315bn debt, about 175% of the country’s gross domestic product, with the troika to chalk out a plan for the progress of the European economy. He plans to introduce a debt deal in the next few months and refused additional bailout cash for Greece. Germany’s Chancellor Angela Merkel ruled out debt termination citing that creditors had already made compromises.